Expert Financial Analysis and Reporting

Business Accelerated Dramatically in 1Q, 2019

Repligen’s stock exploded on Friday April 26, 2019 as it increased $11.65 (up 20%) to $68.89. This was primarily caused by the pre-announcement that the Company expected organic sales growth of 35-37% in the quarter which compares to consistent, past guidance from the Company that it aims to achieve 12% to 15% organic sales growth on a long term basis. It now expects 1Q sales to increase 34% to 36% to $60 to $61 million. (This indicates a slight foreign currency drag.) The Company expects 1Q, non-GAAP EPS to increase to $0.27 to $0.28, up 59% to 65% from $0.17 last year. Obviously, this is a huge upside surprise.

Announces Acquisition of CT Technologies

Repligen also announced a major new acquisition-privately held CT Technologies. This Company is expected to achieve sales of $27 to $29 million in all of 2019 and to contribute $16 to $17 million of sales to Repligen in 2019. Along with other analysts covering Repligen, I need to do some research on CT Technologies. The basic business of CT Technologies is the use of spectroscopy to provide real time analysis of protein concentrations during manufacturing runs. This is a new but complementary business for Repligen in which synergies are anticipated.

Repligen is paying $240 million comprised of $192 million of cash and $48 million of stock or about 700,000 shares. Repligen ended 2018 with $193 million of cash and will use a bridge loan to complement the existing cash position although how much I am not sure. The share count at the end of 2018 was 44 million so that the increase in shares due to this acquisition is about 1.6%.

Preliminary View of 2019 Results

Repligen will be providing full year guidance on the upcoming 1Q, 2019 conference call, but extrapolating 1Q trends we might be looking for sales of existing businesses to reach sales of $259 million and the contribution from C technologies could increase this to $275 million. This would be a 42% increase in sales from $194 million in 2018. However, at this point the Company has not issued guidance on whether it believes that the strong organic sales growth of the first quarter is reflective of full year trends.  In terms of non-GAAP EPS, extrapolation of 1Q results through the remaining quarters of 2019 would suggest non-GAAP EPS of $1.25 versus $0.79 in 2018. The acquisition of CT Technologies is expected to be accretive to this, but Repligen has not said how much. Again, Repligen has not yet provided guidance and these numbers are extrapolations not yet supported by management so take these numbers as guesses at this point.

Remain at Buy

I have had a continual Buy on this stock since my initial recommendation on December 4, 2012 at a price of $6.13 and this Buy recommendation continues.   As I have said on many occasions, I love the business model of this Company. It has also been successful in a roll-up strategy that has led to much greater growth than I expected when I picked up coverage. The downside of this is that the company is now so complicated that I can’t analyze what is going on at the micro level in its several important businesses. Unfortunately, this leaves me and I think most other analysts largely dependent on management guidance in analyzing the stock. This is not unusual for many small companies as they emerge to be bigger, but it is uncomfortable.